* FTSE 100 down 1.5 pct after PM May calls early election
* Set for worst day since Brexit vote aftermath
* Anglo American, Glencore, Rio among top fallers
* BP falls on lower crude prices
(Updates prices, adds election reaction.)
By Helen Reid
LONDON, April 18 British shares headed for their
worst day's drop since the aftermath of the Brexit referendum
last June, after Prime Minister Theresa May said she would call
an early election.
The FTSE 100 dropped 1.6 percent to its lowest in
more than seven weeks as sterling inched higher, further
weighing on the index's stocks, most of which get earnings in
foreign currencies. All but one of the blue-chip
stocks were in the red.
Britain's May called for an early election on June 8, saying
it was the only way to guarantee political stability for years
ahead as Britain negotiates its way out of the European Union
"If we have a stronger government pushing for a 'hard'
Brexit, markets won't like that. But on the positive side, you
would have more stable government for the UK," said David
Stubbs, global market strategist at JP Morgan Asset Management.
"Financial markets have clearly rendered their judgment of
[the Brexit process] through sterling," he said. "Loss of
single-market access, if it happens, necessitated a cheaper
currency, that's the calculation markets made."
Sterling's weakness combined with stronger-than-expected
fundamental economic data had pushed the index to record highs
in the past months.
Investors can expect significant volatility in sterling over
the six weeks until the election as polls indicated levels of
support for the governing Conservatives, Stubbs said.
Traders said the election could eventually lead to a
stronger sterling if May's majority was strengthened and policy
became more predictable.
Lower metals and crude-oil prices were already weighing on
the commodities-heavy index before May's announcement.
Mining companies Anglo American, Glencore,
Antofagasta, Rio Tinto and BHP Billiton
dropped as Chinese iron ore futures fell to three-month lows,
with oversupply worries weighing on steel prices.
Oil major BP was also a top faller, down 2.8 percent
as the price of crude fell. Brent crude reached an 11-day low
after a U.S. government report indicated rising production
Mid caps and small caps outperformed the
blue chips, falling 0.9 and 0.3 percent respectively but holding
near record highs reached in the last trading session.
"I think people have been pleasantly surprised by how
sanguine companies' management teams have been," said Ian
Williams, economist and strategy analyst at Peel Hunt. "In the
last six weeks, the mood of companies presenting has been much
more optimistic, and people are asking whether some of the risk
has been priced in already."
The top fallers on the mid-cap index were all
commodity-linked stocks, led by iron ore pellet producer
Ferrexpo, down 5.2 percent, and miner Evraz,
down 6.3 percent.
Among the few risers in mid- and small-cap stocks were
shipping services providers James Fisher and Braemar
Shipping Services, up 2.4 and 3.3 percent.
Emerging markets-focused fund manager Ashmore was down 2
percent, despite earlier posting net inflows for the first time
in nearly three years, as investors turned back to developing
(Reporting by Helen Reid; Editing by Larry King)